OECD secretariat reviews the functioning of the Italian tax administration

19/07/2016 - Italy is currently undertaking a series of critically important reforms to improve its long-term growth prospects. The current Government has set out its ambitious reform agenda across many policy areas including taxation. Expectations of effective and decisive government actions are high, in particular regarding the tax system. The review, requested by the Ministry of the Economy and Finance, took place in this context. At the moment, Italy has a relatively high and stable tax-to-GDP ratio but levels of compliance with tax laws are low. The focus of efforts to reduce non-compliance has historically been on audits and control, which result in assessments that reportedly are often uncollectable, with no comprehensive strategy across the entities involved in tax administration to address this issue in a holistic manner. There is a significant opportunity to reform tax administration in a way that rationalises resources, provides increasingly high-quality services to taxpayers and secures improved voluntary compliance by taxpayers at large. More specifically, the review contains the following recommendations:

In line with recent actions such as the preventive communications on taxpayers which did not file their VAT return, reforms should aim at generating significant behavioural change, by both taxpayers and tax administration.

Institutional and governance arrangements should be revised to ensure a more strategic political oversight of the tax administration, which should go along with restoring the autonomy of the tax and customs agencies.

A more holistic approach should be introduced to support and enhance voluntary compliance by taxpayers while ensuring that those that do not comply are promptly identified and sanctioned.

The collection of tax debt needs to be modernised, building on the positive results achieved since the function was brought into the public sphere. Information technology, data analytics and related administrative simplifications can and should be at the centre of these reform efforts.

What is needed is a structural reform which results in behavioural changes of all players rather than purely institutional changes. More coherence will be achieved with increased strategic oversight at ministerial level and with more autonomy of the agencies in the implementation of this strategy. Priority should be given to developing a strategy to tackle non-compliance, coordinating the agencies, the Guardia di Finanza, and Equitalia. This strategy should combine a tougher approach on non-compliant taxpayers with a co-operative compliance approach with generally compliant taxpayers, in particular MNEs.

Background

Following a request of the Italian Minister of Economy and Finance Pier Carlo Padoan, the OECD Centre for Tax Policy and Administration has carried out a review of the organisational structure and institutional arrangements of Italy’s tax administration, with a focus on the Agenzia delle Entrate (the Revenue Agency) and the Agenzia delle Dogane e dei Monopoli (the Customs Agency). The review also highlights certain critical issues related to tax compliance and collection which emerged in the course of the work. Several meetings were held with the Italian authorities, namely the Minister of Economy and Finance and the heads and senior managers of the Italian institutions involved in tax administration. Meetings were also held with labour unions, stakeholders and experts in tax matters, including small and medium sized enterprises (SMEs) and their consultants, to gather a broad range of views on Italy’s tax administration. A draft of this report was provided to the Italian authorities in January 2016 to check the factual descriptions' accuracy and finalised shortly afterwards.